The Corporate Transparency Act regulates “filed” entities, which includes the Series LLC. Since a Delaware Series LLC represents only one filed entity, the CTA should require only one FinCEN filing. A Series LLC establishes protected series by private Operating Agreement. Although protected series are separate legal persons, they are part of one juridical entity. In Delaware, protected series are created without any additional public filings.
If FinCEN were to require Delaware Series LLCs and all protected series to file separate beneficial ownership reports, the burden on businesses would be unreasonable. A beneficial owner of a Series LLC could have control over dozens, or even thousands of protected series. An overwhelming volume of beneficial ownership filings coming from Series LLCs could contribute to issues with administrative registries. This could lead to unfair penalties for innocent parties and duplicative reporting requirements. Additionally, the benefit to financial institutions and investigators would be minimal.
IncNow®’s Suggestions to FinCEN
In April 2021, FinCEN issued an Advance Notice of Proposed Rulemaking to solicit public comment on a wide range of questions related to the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA). IncNow provided four responses. Our responses addressed the Series LLC and whether the Series LLC should be covered by the CTA.
IncNow argued that only the “mothership” Delaware Series LLC should be required to file a CTA report with FinCEN. Each “daughter” protected series should not have to file a report because they are established only by private Operating Agreement. They are not filed or formed.
We proposed that any controlling party or beneficial owner of the entity, whether only owning 25% of any given protected series or 25% of the mothership, simply be filed as part of the “mothership” filing. Thinking of this like horses would “rope in” all its protected series into one umbrella filing “paddock”. This would be more efficient and helpful than cordoning off the protected series into separate “barns” with a multitude of separate filings.
“IncNow argued that only the “mothership” Delaware Series LLC should be required to file a CTA report with FinCEN.”